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Surging Demand for Critical Minerals Driven by Energy Industry
The International Energy Agency (IEA) has reported a significant surge in demand for critical minerals used in low and zero-emission technologies, with the energy industry playing a major role in driving this growth. According to the IEA's Critical Minerals Market Review, there was a threefold increase in demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel between 2017 and 2022. The report attributes this increase to the energy sector's demand. Investment in critical minerals development also saw a substantial increase, with a 30% rise in 2022.
Renewables Set to Overtake Coal
The IEA previously stated that renewables are on track to overtake coal and become the largest source of electricity generation by the mid-2020s. This highlights the crucial role that critical minerals play in technologies such as wind turbines and electric vehicles (EVs). The availability of critical minerals is vital to meeting climate pledges set by governments. However, there are challenges ahead, including project delays and technology-specific shortages, underscoring the need for more projects in the coming years to limit global warming to 1.5 degrees Celsius.
The Growing Market Size for Critical Minerals
The market size for critical minerals in the energy transition reached $320 billion in 2022, demonstrating a doubling over the past five years. The critical minerals sector also experienced record fundraising, with start-ups raising $1.6 billion in 2022. The usage of batteries and solar photovoltaic (PV) technologies has led to unprecedented growth in the critical minerals market.
Geopolitical Importance of Critical Minerals
The development of mining and processing sites for critical minerals has significant geopolitical implications due to their importance in low and zero-emission technologies. China currently leads in the extraction of graphite and rare earths and the processing of lithium. However, it relies heavily on the Democratic Republic of the Congo for mined cobalt. The IEA's report highlights limited progress in diversifying supply sources, particularly in refining operations. The majority of planned projects are concentrated in incumbent regions, with China and Indonesia dominating the lithium and nickel sectors, respectively.
Challenges in Sustainability and Supply Chain Security
The sustainability credentials of the critical minerals industry require improvement. The IEA notes a significant increase in water withdrawals and greenhouse gas emissions. While the market growth for critical minerals is promising, there is still much work to be done to ensure secure and sustainable supply chains. The IEA's executive director, Fatih Birol, emphasizes the need for further action to address these challenges and achieve energy and climate goals.
Conclusion: Seizing Opportunities in the Critical Minerals Market
The surging demand for critical minerals driven by the energy industry presents an attractive opportunity for new businesses to enter the market. With the shift towards renewable energy sources and the increasing adoption of low and zero-emission technologies, the demand for critical minerals like lithium, cobalt, and nickel is expected to continue growing.
Riding the Wave of Renewable Energy
As renewables are projected to overtake coal as the primary source of electricity generation, critical minerals will play a pivotal role in the development of wind turbines and electric vehicles. By positioning themselves in the supply chain of these technologies, new businesses can tap into the growing market size for critical minerals, which reached a staggering $320 billion in 2022.
Navigating Geopolitical Challenges
However, it's crucial to acknowledge the geopolitical implications of the critical minerals industry. China currently dominates the extraction and processing of key minerals, creating a potential supply chain vulnerability. New businesses entering the market should aim to diversify supply sources and contribute to refining operations, reducing dependence on a single region or country.
Embracing Sustainability and Supply Chain Security
Sustainability and supply chain security are pressing concerns in the critical minerals industry. To thrive in this market, new businesses must prioritize environmental responsibility and work towards reducing water withdrawals and greenhouse gas emissions. By developing innovative, sustainable mining and processing techniques, these companies can establish a competitive edge and meet the increasing demand for ethically sourced critical minerals.
In conclusion, the soaring demand for critical minerals presents a unique opportunity for new businesses to enter the market and support the global energy transition. By aligning their strategies with renewable energy goals, addressing geopolitical challenges, and prioritizing sustainability, these businesses can carve out their niche in this rapidly growing sector and contribute to a greener and more sustainable future.Article First Published at: https://www.cnbc.com/2023/07/12/energy-sector-driving-demand-for-lithium-other-critical-minerals-iea.html